How to put your money to work.

I work part-time, and my money works part-time for me too. By putting my money to work, I don’t have to work full-time. Using passive income strategies opens up the majority of my week to do whatever I want.

Passive income is my favorite type of income because it has the ability to continuously grow without taking your time. It’s a great revenue stream since it requires minimal involvement after the investment or work is done.  Here are passive income strategies anyone can use to fulfill their immediate needs and long-term goals.

Savings Accounts

Savings accounts have low interest rates but offer high liquidity, making them the best place to keep your emergency funds. This accessibility creates a safety net to cover unexpected expenses without fees or penalties. While the interest earned is minimal, the benefits of having quick access to cash outweighs the lower returns.

I recommend keeping enough cash to cover 3-6 months of expenses in your savings account for emergency funds.

Current market rates for high-yield savings accounts range from 3.5% – 4.85%. For a few examples of how your savings dollars can work for you, I am calculating annual savings at 4.5%. Maintaining a balance of $10,000.00 for 12 months will generate $450.00 interest income by the end of the year. A $25,000.00 balance will generate $1,125.00 and a $50,000.00 balance will generate $2,250.00 interest income over a 12 month period.

Important to note that regular savings and checking accounts pay minimal interest rates around 0.01%. Some banks will offer up to 0.11% interest to accounts with a daily balance of $5,000.00 or more. Many banks also have different rates between 0.01% to 0.11% for different dollar amount brackets, offering the higher rate to depositors of $500,000.00 or more.

Money Market Accounts

Money market accounts offer a combination of features from both savings and checking accounts. This type of account usually requires a daily balance of $5,000.00 or more though. Like savings accounts, they offer easy access to your money, allowing limited check writing and debit transactions.

The current interest rates for money market accounts can vary, ranging from 3.60% to 4.41%. These rates are usually in line with the federal interest rates, often changing in unison with rate increases and decreases. At 4.41% a daily balance of $5,000.00 would earn $220.50 per year. A $25,000.00 daily balance will generate $1,102.50 and a $50,000.00 daily balance will generate $2,205.00 interest income over a 12 month period.

Certificates of Deposit (CDs)

Certificates of Deposit (CDs) offer higher interest rates in exchange for locking in funds for a specified term. CDs are ideal for investors who seek predictability in their investment returns without taking on excessive risk. They are also considered a safe investment as they are typically insured by the FDIC, protecting against bank failures. The current interest rates for CDs varies largely between 0.10% to 5.10%. The variance is due to a wide range of options and timelines.

To give you an example of the potential earnings I’ve seen CDs generate: I once had a client deposit $1,000,000.00 in a 12 month CD. It generated about $85,000.00 in interest income at 8.5% over the 12 month period. At the end of the period they renewed the CD for another 12 months with a higher interest rate too. I don’t know about you, but I can certainly live comfortably off $85,000.00 a year!

Now, a million dollars… New life goal! Need to save up a million dollars so my money works full-time for me and I can retire.

Brokerage accounts

Brokerage accounts put your money to work by investing in stocks, bonds, and mutual funds. Generating passive income through dividends and capital gains. These accounts have flexibility to buy and sell investments. Allowing you to contribute and withdraw funds at any time without restrictions. Important to note that brokerage firms charge fees for account maintenance, commissions and managing transactions. Research tools and resources are also provided for building a portfolio that suits your financial goals and risk tolerance.

There is no guarantee that you will make money with brokerage accounts. The return on your investment relies on the performance of the investment itself. These type of investments can generate both gains and losses. Historically the S&P 500 reports returns of 6% to 10% annually but actual returns can vary greatly.

Another way brokerage accounts put your money to work for you is with a reinvestment plan. These plans compound investment returns by reinvesting your dividends earned, distributions issued and capital gains. This automated strategy lets you accumulate more investments at no charge. If your investment consistently performs well, reinvesting will accumulate more wealth in the long run.

Retirement accounts

Retirement accounts like 401(k)s and IRAs have many advantages. The best advantage is employer matching contributions that boost and sometimes double savings for employees. These retirement plans have many options, allowing individuals to tailor their investments according to their risk tolerance and financial goals. With proper management and regular contributions, retirement accounts can become a cornerstone of a secure financial future.

Retirement accounts typically have returns of 5% – 8% annually but returns are not guaranteed and can vary greatly. Market conditions directly influence the returns on your retirement account. Since these accounts are intended for long-term saving there can be fees, penalties and taxes that come with early withdrawal.

It is also important to stay informed about changes in tax laws and contribution limits for retirement accounts. Changes can impact the effectiveness of your retirement savings strategies. Important to note that each account type aligns with different timelines, financial goals and risk tolerances. Most importantly consult with a professional when choosing the right retirement account for you.

Consult with a certified financial advisor

Finding the right investments for you involves assessing your financial goals, risk tolerance and investment timeline. You definitely want to leave this to the professionals. Start by defining what you want to achieve. Consider whether it’s supplementing your income, saving for retirement, funding education or building wealth. Next, evaluate your risk tolerance. Consider whether you are comfortable with market fluctuations or prefer safer, more stable options. Conduct thorough research into various investments, like the ones detailed in this article.

Once you know what you want to achieve and your risk tolerance, you are ready to meet with a professional. Consult with a Certified Financial Advisor for personalized advice that aligns with your specific situation. Work with them to regularly review and adjust your investment strategy as your needs and market conditions change.

Real Estate Investments

Passive income from rental properties involves a workload that is gradually minimized over time. Investors acquire and rent properties to tenants, generating monthly cash flow. The income generated from these holdings should cover the mortgage, property taxes, and upkeep while also providing a profit. A Property Management company can manage every aspect of the property for you. This arrangement allows investors to focus on other endeavors while still benefiting financially from their rental property investments. With this collaborative approach you can turn real estate into a lucrative source of passive income.

Creative projects

There are so many creative projects that can generate passive income. Ranging from writing a book, creating online educational courses, offering digital design services to creating content for blogs and websites. Individuals can express their creativity and share their knowledge while creating opportunities to build a sustainable income stream. By leveraging social media and e-commerce platforms, creative entrepreneurs can reach a global audience eager for unique products and services.

The best part about passive income from creative projects is that they can have unexpected life cycles. I’ve had clients write a book that becomes a best seller years after they wrote it. Things come back around sometimes when you least expect them to… Don’t be discouraged if your creative project doesn’t generate the income you hoped it would at first. Your project can randomly go viral and all of a sudden you are back in business!

Bookkeeping for passive income

Investment, brokerage and retirement accounts offer transparency through monthly statements. Detailing assets, revenues, expenses, distributions, gains and losses. Providing all the financial information and insights you need in one monthly statement. Unless your investments are held by an entity, you don’t need bookkeeping services to track activities and profitability.

Real estate investments and creative projects on the other hand are more like a business. They need monthly bookkeeping services to produce financial reports and information. Monthly reports issued by property management companies and e-commerce platforms do not capture all activities related to the business. Third party service providers can only report revenues and expenses relevant to the transactions they manage. Accounting for these two types of investments includes assets, liabilities and equity along with other revenues and expenses. Examples of other revenues include interest earned, royalties, credit card rewards and refunds from insurers. Examples of other expenses include insurance, taxes, legal fees, copyrights, patents, trademarks, advertising, marketing, bookkeeping, accounting and utilities.

Need help from an experienced bookkeeper? I got you. DIY bookkeeping can be overwhelming when you don’t really know what you are doing. If you aren’t familiar with bookkeeping and GAAP, you are better off leaving this work to the professionals. Contact Me for assistance with monthly bookkeeping services. Introductory call and initial consultation are provided at no charge. Glad to help!

I hope you find the information in this article helpful. Passive income strategies are a great way to generate revenue with minimal time and effort. Contact Me if you’d like a referral for a Certified Financial Advisor. I know a few that would be happy to connect with you.

If you have more ideas on how to put your money to work, please let us know in the comments. I’d love to hear from you!

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